Biggest property price gains are outside the capital cities

From Geraldton to Townsville, regional property markets have outperformed the capital cities over the past three months.

The gains were driven by strong growth in the mining towns of Western Australia and Queensland, with quarterly price gains strongest in Mackay (8.3 per cent), followed by Geraldton, up 8.2 per cent, and Townsville, up 6.6 per cent.

Geraldton also recorded the strongest annual increase with dwelling values up 28.7 per cent over the year to October, adding more than $100,000 to the median value. Queensland’s Gladstone and Townsville also recorded significant annual growth of 27.2 per cent and 26.9 per cent respectively.

While sales activity was broadly losing momentum, Geraldton and Gladstone were again the standout performers, recording an increase in their annual sales volume of 44.2 per cent and 34.3 per cent, respectively.

Dwelling values in regional areas rose 1.1 per cent over the three months to October, exceeding the 0.8 per cent growth recorded in capital cities.

Kaytlin Ezzy, CoreLogic Australia economist and author of the CoreLogic Regional Market Update released Wednesday (27 November), said Queensland and Western Australia regions continued to dominate the top-performing- lists, taking out the top eight spots for quarterly value growth areas.

“Regions like Mackay, Geraldton, and Townsville are seeing exceptional growth, driven by affordability advantages compared to our major cities, as well as lifestyle appeal,” Ms Ezzy said.

“This will have contributed to the strong demand but even with the impressive growth, for those with the capacity to service a mortgage, they still remain attainable with medians less than $600,000.”

Conversely, across Australia’s largest 50 non-capital city Significant Urban Areas (SUAs), seven out of eight Victorian SUAs and 10 out of 21 NSW SUAs saw values fall over the three months to October.

The holiday town of Batemans Bay, on NSW’s south coast, recorded the largest decline, down 2.7 per cent over the quarter, followed by Victoria’s coastal city of Warrnambool, down 2.6 per cent.

Rents are also still inching upwards in the regions (0.5 per cent over the quarter), whereas they were unchanged over three months in the combined capital cities. Albany led the way for quarterly rental growth (3.0%).

The Kalgoorlie–Boulder region continued to record the highest gross rental yields among the largest regional Significant Urban Areas (SUAs), at 8.8 per cent, despite yields falling 70 basis points from a recent peak in March (9.5 per cent). Similarly, the Bowral–Mittagong region in NSW continued to record the lowest gross rental yields at 3.2 per cent, with yields expanding 20 basis points over the same period.

Over the year, 10 markets in NSW and Victoria fell in value, with Ballarat recording the largest fall at of 6.3 per cent, followed by the St Georges Basin–Sanctuary Point region in NSW, and the Warragul–Drouin region in Victoria, both down 3.9 per cent over the year.

Ms Ezzy said the downturn in regional coastal and lifestyle areas of Victoria and NSW partially reflects their strong performance during Covid, when demand surged for affordable lifestyle markets and more space.

“While these markets thrived during the early stages of Covid, reduced affordability and a range of headwinds have since softened conditions,” she said.

“There’s certainly been a slowdown in demand for these areas and more stock on the market and that’s in addition to higher interest rates, cost of living pressures, and limited borrowing capacity.”

API Magazine’s recently released quarterly property sentiment report found there was a renewed expectation that property prices in the regions would continue to rise over the next 12 months.

After falling 13 percentage points the previous quarter, most of that drop was recovered, with 64 per cent respondents now expecting prices to rise. This is the second highest ratio in the nine quarters this metric has been measured.

Issues with regional relocations

While the figures point to the regions broadly enjoying economic strength, the volume of people moving from the cities to regions is creating housing pressures that are escalating.

Real Estate Institute of Australia (REIA) President, Ms Leanne Pilkington, said the latest data revealed that the number of city-dwellers considering a move to regional areas has doubled over the past 18 months.

Citing the Year 2 Progress Report by the Regional Australia Institute (RAI), she said there was an urgent need to address key pressure points, particularly housing availability and affordability, to support regional communities.

“The persistently low regional rental vacancy rates, which remain well below the three per cent threshold for balanced rental markets, highlight the ongoing housing supply challenges in these areas.

“Regional areas have also experienced a sharper increase in house prices compared to capital cities, with prices rising by 54.2 per cent from March 2020 to December 2023, compared to 29.3 per cent in urban centres,” she added.

REIA partnered with the RAI and Master Builders Association earlier this year to host the National Regional Housing Summit, where nearly 300 delegates gathered in Canberra and online to address these critical issues.

Ms Pilkington said the recent National Regional Housing Summit in Canberra reinforced that regional Australia requires bespoke solutions that cater to the unique market dynamics of each community.

“Key messages from the summit included the need for long-term, systemic thinking, increased infrastructure investment, and enhanced collaboration across all levels of government and stakeholders.

“REIA’s policy positions include governments creating conditions for more dynamic regional rental markets, including significant investment in social and affordable housing, increasing housing supply and diversity and ensuring a steady pipeline of development-ready land is vital to meet demand.”

Ms Pilkington said the Australian Government’s recent housing programs, including the Housing Australia Future Fund, are positive steps but currently lack a specific allocation for regional areas.